Pharma/Life Sciences Hiring and Compensation Trends

Transcription

1 Pharma/Life Sciences Hiring and Compensation Trends New York Pharma Forum John McLean Managing Partner Practice Leader Global Life Sciences June 4, 2015

2 On the Agenda Human capital landscape Talents/skills in demand Factors affecting life sciences hiring Trends in executive compensation 2

3 Human Capital Landscape BUSINESS CONTEXT TALENT ISSUES Scarcity of Talent Workforce Planning HR Embracing Big Data Sustainable build or buy strategy for key talent in target locations. Unsure what to measure, where to start, how to organize the function. Intense Competitive Landscape Unengaged Workforce Need to define, manage, and deliver on the employee value proposition. Ultra-informed Workforce Social media; need to provide employees information and manage external perception. Manage Talent as Corporate Asset Shortage of Skilled Leaders Staying Relevant Front-line managers don t apply rigor in making key talent decisions. New and different skills required to lead multi-cultural teams in a more complex environment. Courtesy of Stephen Mork, Mercer, June 2,

4 The Reform-Era Life Sciences Executive Four essential areas of excellence: 1. Business and commerce (including extensive market/regulatory knowledge) 2. Communications (internal as well as board/stakeholder/investor relations) 3. Collaboration and teambuilding 4. Innovation McLean, John. The Reform-Era Life Sciences Executive. Nature Biotechnology. March 31,

5 Recruiting a CEO or Top Executive 1. Determine who will decide what s needed in the next CEO or executive. 2. Decide whether to hire a search firm. 3. Define your ideal leader. 4. Survey the landscape. (Can we possibly find this person?) 5. Sell the opportunity. McLean, John. 5 Essential Tips When Hiring a New CEO, MDDIonline.com, March 31, 2015; 5

6 What s Happening in Compensation? Step aside Wall Street, small pharma CEO pay reaches for the sky January 5, 2015 Pharma Pricing: Striking a Post-ACA Balance Bristol-Myers Say-On-Pay Vote Squeaks By May 8, 2015 April 14,

7 Economic Context Average Salary Movement % of Base 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 2014 SIRS Life Science Average Salary Movement = 2.4%* 2.1% 2.0% 2.6% 2.2% Administrative Technical Management Support 2014 Inflation Increase = 1.7% Courtesy of Stephen Mork, Mercer, June 2,

8 Incentives: Performance Measure Weighting The majority of companies planning to change the weighting of performance measures within their annual incentive plan have indicated that they intend on increasing the weighting of their corporate (financial) measure this year (58%), with the individual measure being the next most common (30%). Corporate (financial) Corporate (non-financial) Business unit/division (financial) Business unit/division (non-financial) Individual Use of discretion (below NEOs level) 16% 13% 26% 26% 26% 15% 18% 30% 24% 17% 0% N=44 58% Other 7% 33% 0% 20% 40% 60% 80% Increased Decreased Other includes: Safety; Leadership; Personal; Sales. Courtesy of Stephen Mork, Mercer, June 2,

9 Market Long-Term Incentives Trends The Past Today Evolving Trend Vehicles Heavy reliance on stock options Increased use of a portfolio approach (stock options, restricted stock and performance shares) Greater use of performance differentiated grants Many industries will likely continue the trend toward a portfolio approach Pay Mix Heavy focus on LTI (options had no cost and were granted with broad eligibility) Modest shift from LTI to annual cash Rationalize use of LTI, and rethink eligibility/participation Continued examination of eligibility/participation, especially below the senior executive level to manage share usage Performance Shares Limited use of performance share plans Increased use Typically use 3-year point-to-point approach Continued use at senior levels Increased use of annual milestone approach to goals given challenges in setting targets Mandatory Deferrals Limited use Limited but increasing Primarily service-based As companies focus on quality of earnings, we expect increased use of performance-based deferrals Courtesy of Stephen Mork, Mercer, June 2,

10 Compensation Philosophies Pre Commercialization Light Hiring Soft Compensation Philosophy Pay what is necessary to attract critical roles (R&D, Execs) Everyone Wins Incentive Design Commercialization Aggressive Hiring Specific Compensation Philosophy Targeted market philosophy for base pay Targeted incentives for specific roles and performance Courtesy of Stephen Mork, Mercer, June 2,

11 BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 11

12 BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 12

13 Biotech CEO Compensation Packages BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 13

14 Biotech CEO Equity Mix* BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 14

15 Biotech: Bonuses as a % of Total Comp BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 15

16 Biotech COO Compensation BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 16

17 Biotech COO Equity Mix BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 17

18 Biotech CFO Compensation Packages BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 18

19 Biotech CFO Equity Mix BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 19

20 R&D Officer Compensation Packages BioWorld Executive Compensation Report 2014: Trends in C-Level Salaries and Benefits in the Biopharma Market, Thomson Reuters 20

21 WITT/KIEFFER In business since 1969, we are the only top 10 firm dedicated to healthcare and life sciences. We have developed the world s largest historically comprehensive database of candidates in healthcare and the life sciences. We believe a search firm should share in the risk associated with critical hires; we guarantee our placements for two years. Our placements stick. Our most recent study indicates that, after six years of employment, almost 80% of our placements are still with the organization where they were originally placed. 21

22 Feel free to get in touch: 22

23 Pharma/Life Sciences Global Hiring and Title Trends Janet Foulkes Performance Milestone Executive Search and Strategic Mapping United States United Kingdom Switzerland Australia

24 WHY DO PEOPLE WORK?

25 Maslow Hierarchy of Needs

26 WHY DO PEOPLE WORK? Mission/ Vision Fulfillment Title /Promotion Leadership/Program team Company stability/ organization Compensation/Benefits

27 But in Reality if Well Managed Mission/ Vision Fulfillment Leadership/Program team/ Other Company stability/ organization Title /Promotion Cash

28 New & Old Titles & Approaches to advancement OLD WORLD ALTERNATIVE C suite Vice President (Executive, Snr., Global ) Director Hierarchy Stability Not all firms equal Functional/ Descriptive Global Sensitivity Program Entrepreneurial

29 Title vs. Mission/Opportunity Multiple C CEOs; CFOs; CMOs Ariad is not Astellas Shionogi is not Sanofi? VPs in a start-up of 40 Functional Titles Medical Science Director Clinical Research Licensing Director Business Unit Head Global Franchise Lead

30 Transformative Situations Recent examples last 3 years Board diversity and focus Chase Pharmaceuticals Questcor (ac. Mallinckrodt) First of CPO - Chief Patient Officer Sanofi Editor-in-Chief The Medicines Company Confidential President to be CEO of $6 Billion Baxter BioScience/Baxalta

31 Title doesn t drive Salary Base Salaries Bonus and Benefits extra EU US Δ Level H 125,034 GBP 189, ,000 38% Regional Head of Commercial 275,000 CHF 292, ,000 35% CMO 350,000 CHF 372, ,000 7% Head of Development 210,000 GBP 336, ,000-22%

32 Salary doesn t drive Performance Research shows up to 25% increase in business performance can be achieved by line managers working with their teams on individual development Focus scores for Individual Development historically reveal 30% of staff do not feel their talents & abilities are fully utilised Diversity consider alternate benefits Flexible working Child-care Schooling/further education support Car/commuting/on site facilities

33 Bench - How/Why We Work Performance milestone payments vs. traditional time-based invoicing Doing the hard work to provide comprehensive access to talent (not just the usual suspects ) ONE Global Team, ONE Budget. NO competing offices. NO geographic boundaries. Exclusive dedication for 40 years to the healthcare industry